Environmental Economics - Notes and Resources from the Livestream

As environmental issues become more pressing, the role of economics in addressing climate change, pollution, and sustainable energy solutions has never been more critical. From river pollution in the UK to Morocco’s ambitious solar energy investments, understanding the economic principles behind these challenges can help us craft better policies for the future.

This blog post explores key environmental economics topics covered in our Spring 2025 Livestreams, including government intervention in renewable energy, the impact of pollution, and market failures. Plus, we’re offering a free PowerPoint download for students and teachers to use in A-level revision and teaching!

River Pollution in the UK: Market and Regulatory Failures

A 2022 report by the House of Commons Environmental Audit Committee described England’s rivers as being in a “mess,” contaminated by a “chemical cocktail” of sewage, agricultural waste, and plastic pollution. Cleaning up these waterways is vital for public health and biodiversity. However, market and regulatory failures have allowed pollution to persist.

Externalities of River Pollution

1. Public Health Costs – Contaminated water increases cases of illnesses such as gastrointestinal infections and skin diseases, putting additional strain on the NHS.
2. Loss of Recreational Value – Polluted rivers discourage activities like swimming, fishing, and boating, negatively affecting local tourism and businesses reliant on clean waterways.

Should the Government Intervene in the Heat Pump Industry?

The UK government aims to install 600,000 heat pumps per year by 2028, a key strategy in reducing emissions from home heating. However, barriers such as high installation costs, lack of public awareness, and limited availability of trained installers make intervention a complex issue.

Micro and Macro Benefits of Government Intervention

1. Microeconomic Impact: Addressing Market Failure – Heat pumps reduce emissions compared to gas boilers, helping the UK meet net-zero targets. However, without subsidies, many households may continue using traditional heating due to high upfront costs.
2. Macroeconomic Impact: Jobs and Trade – A shift towards heat pumps reduces dependence on imported gas, strengthening the UK’s energy security and creating jobs in manufacturing, installation, and maintenance.

Potential Government Failures

1. Fiscal Costs – Subsidizing heat pumps is expensive and could divert funds from other carbon reduction initiatives like home insulation.
2. Ineffective Policy Incentives – Many homes require extensive retrofitting for heat pumps to function efficiently. If homeowners are unwilling to invest in these modifications, even generous subsidies may not achieve the expected adoption rates.

Morocco’s Investment in Solar Power

Morocco is emerging as a global leader in renewable energy, with ambitious plans to generate 52% of its electricity from renewables by 2030. A key project is the Noor Power Station, the world’s largest concentrated solar power (CSP) plant, boasting a capacity of 510 MW.

Macroeconomic Effects

1. Trade – Morocco’s expansion of solar power reduces its reliance on imported fossil fuels, improving energy security and allowing the country to export clean energy, particularly to the European Union.
2. Jobs and Economic Growth – Investments in solar infrastructure generate employment in construction, maintenance, and research, boosting aggregate demand (AD) and long-run aggregate supply (LRAS).

Microeconomic Effects

1. Lower Electricity Costs – Solar power expansion can stabilize or lower energy prices, benefiting households and businesses.
2. Land Use and Water Demand – Large-scale solar farms require significant land, which may disrupt agriculture. CSP technology also has high water demands, a challenge in Morocco’s water-scarce environment.

Free Download for Students & Teachers

If you’re preparing for A-Level exams or teaching environmental economics, our PowerPoint slides are available for free. These resources provide key definitions, case studies, and evaluation points to support learning and revision. Click the link at the bottom of the page.

Glossary of Key Terms

• Externalities – Costs or benefits of an economic activity that affect third parties who are not directly involved in the transaction.
• Market Failure – A situation where markets do not allocate resources efficiently, often requiring government intervention.
• Regulatory Failure – When government policies do not effectively address market failures or create unintended negative consequences.
• Net-Zero – A state where the amount of greenhouse gases emitted is balanced by the amount removed from the atmosphere.
• Fiscal Costs – The financial burden on the government and taxpayers associated with funding public projects.
• Aggregate Demand (AD) – The total demand for goods and services within an economy at a given price level and period.
• Long-Run Aggregate Supply (LRAS) – The total amount of goods and services an economy can produce when all resources are fully employed.

By exploring these key areas, we can better understand the economic policies shaping our environmental future. Whether it’s addressing river pollution, incentivizing heat pump adoption, or expanding solar power, economics plays a crucial role in sustainability.

Want more? Download our free slides and take your A-Level revision to the next level!